Sell stocks! Buy bonds! Viacom is offering a quarter-billion dollars' worth of senior debentures—due in 2043—the sale of which will be used to repay some of the network's outstanding debts, as well as its stock buyback program.
All is not well at the media conglomerate's TV division, which is struggling with a weak holiday season at kids' network Nickelodeon in the midst of a soft market for kids' toys and games generally, as well as rough year-on-year comparisons for MTV. Filmed entertainment at Paramount is also up against unflattering comparisons to last year's Transformers: Dark of the Moon box office, as well as Captain America: The First Avenger. This year's offerings (notably Nickelodeon Movies/Paramount release Fun Size, which opened to poor reviews and worse box office) have met with less success, though the wildly profitable Paranormal Activity series continued its hot streak. The studio has high hopes for year-ender Jack Reacher as well.
The softness has not gone unnoticed in the marketplace—on yesterday's earnings call, analyst Marci Ryvicker raised with Viacom president and CEO Philippe Dauman "that there may be a possibility that your share buyback falls below $2.5 billion if ratings trends don't improve, specifically to MTV." Dauman cut her off: "We will buy at least $2.5 billion of our stock in 2013," he said.
With another $250 million to spend, that appears to be a much surer proposition—the entertainment conglomerate is also offering to trade notes due in 2036 and 2037 for the new, longer-lead debt. If nothing else, the buyback program—which has been ongoing through all of 2012—will shore up share price as Dauman and his network executives work on figuring out how to return Viacom's networks to high ratings.
Viacom shares were trading up 0.42 percent on the news at press time.